Hezbollah signals no end to Saudi crisis; c.bank reassures on currency

BEIRUT, Feb 26 (Reuters) - Hezbollah indicated there would
be no apology to Saudi Arabia over Lebanon's decision not to
condemn attacks on Saudi diplomatic missions in Iran, signalling
no quick end to a crisis seen as a risk to Lebanese economic and
political stability.

The Lebanese central bank governor in an interview with
Reuters meanwhile urged the government to mend ties with Saudi
Arabia, but said reports on potential financial repercussions of
the crisis were overblown and there was no risk to the currency.

The crisis came to a head last week when Saudi Arabia halted
a $3 billion aid package for the Lebanese army in response to
the government's failure to sign up to statements condemning
attacks on Saudi diplomatic missions in Iran.

The row reflects the wider conflict between Iran and Saudi
Arabia. Lebanon has been an arena for that struggle for the last
decade during which Saudi Arabia's Lebanese allies have
struggled to confront the growing power of Iran-backed
Hezbollah.

Saudi Arabia and other Gulf states have urged citizens
against travel to Beirut. Many in Lebanon fear repercussions for
the hundreds of thousands of Lebanese employed in the Gulf,
while the crisis is also exacerbating Sunni-Shi'ite tensions.

"What happened in the last week from Saudi requires Saudi to
apologise to Lebanon, because it insulted Lebanese," Sheikh Naim
Qassem, the Hezbollah deputy leader, said in a speech during a
religious occasion in Beirut. "Lebanon will not be a Saudi
emirate, or an emirate for anyone else," he said.

Hezbollah is part of a Lebanese unity government that
includes Saudi-allied politicians but is hamstrung by divisions.
The government this week issued a statement that fell short of
condemning last month's attacks on Saudi missions by Iranians
who were angered by the execution of a Shi'ite cleric.

Saudi Arabia is demanding an apology from the government.

Sunni politician Saad al-Hariri on Monday urged King Salman
not to abandon Lebanon, reflecting unease among Saudi allies who
seem to have been caught off guard by the decision.

Interior Minister Nohad Machnouk, a member of Hariri's
Future Movement, said on Thursday he thought it was necessary to
suspend "for a time" regular Future-Hezbollah meetings that have
been credited with containing Sunni-Shi'ite tensions in Lebanon.

The Future-Hezbollah meetings are a rare example of
Sunni-Shi'ite dialogue in the Middle East as rivalry between
Saudi Arabia and Iran fuels wars in Syria and Yemen.

Even with regional upheaval, Lebanon has so far avoided the
kind of all-out war underway in Syria, where Hezbollah is
fighting on the side of President Bashar al-Assad against
Saudi-backed rebels.

Hariri accused Hezbollah on Thursday of "acting freely in
all Arab countries", saying this risked "an unprecedented
catastrophe for the country and the Lebanese".

CENTRAL BANK WANTS GOVT TO FIX TIES

"The Saudi offensive pressure against positions of Iranian
influence in the region has reached Lebanon," said Nabil Bou
Monsef, a commentator at Lebanon's An-Nahar newspaper.

The central bank governor said he hoped the government would
get "its act together to reestablish good relations with Saudi
Arabia, as Lebanon has always been an economic partner with the
kingdom".

Riad Salameh told Reuters he had not been informed of any
measures by Saudi Arabia targeting the Lebanese financial sector
or expatriates in Saudi Arabia, saying he thought Saudi
statements were "not aggressive to the Lebanese people".

Media reports about the size of Saudi deposits at the
central bank were inflated, he said, and neither Saudi Arabia
nor other Gulf Arab states had been in touch about them.

"I think the market has been misinformed, figures have been
largely inflated," Salameh said.

"Besides all these stories circulating that are not
substantiated by Saudi official positions ... I have not been
informed officially, of any measure - coming or happening -
concerning the financial sector," Salameh said.

"There is no risk on the Lebanese pound" and the central
bank and Lebanese commercial banks had "the means ... to secure
the stability of the Lebanese pound", he said. The pound
is pegged near 1,507.5 to the U.S. dollar.

Saudi Arabia said on Friday it had blacklisted four
companies and three Lebanese men for having links to Hezbollah.

Yemen's Gulf-backed government also this week accused
Hezbollah of training Houthi forces, fighting alongside them,
and planning attacks in Saudi Arabia. Iran and Hezbollah reject
accusations they have provided military aid to the Houthis.
(Reporting by Tom Perry/Laila Bassam; Editing by Dominic Evans)